Commercial rent growth in Australia is expected to resurface, following a period of correction and uncertainty. For investors and owner-occupiers alike, the current phase is where commercial property rent trends are divergent between sectors and locations, yet the broader momentum is upward.
As financial conditions begin to ease and tenants respond to supply constraints, commercial leasing cost forecasts point to moderate growth in office and retail rents and stronger gains in industrial/logistics.
This article will unpack the sector-by-sector outlook, explore the principal drivers behind rent movements and provide clear-cut tactics for those looking to act in this market.
Key takeaways: Australian commercial rent growth forecast and insights
Sector | Rent trend | Vacancy outlook | Key drivers | Investor insight |
Industrial & logistics | Strongest growth; face rents in infill markets projected to rise | Still among lowest globally | Supply scarcity, sustained e-commerce demand, high replacement costs | Focus on prime infill assets with secure covenants and limited supply exposure |
Office | Gradual recovery; with growth in prime CBD markets | Easing in core precincts; elevated in secondary stock | Flight to quality, rate-cut expectations, constrained new supply | Target modern A-grade and premium offices in amenity-rich CBD and fringe areas |
Retail | Low growth led by neighbourhood and essential-service centres | Tightening in suburban corridors | Consumer resilience, limited new supply, experiential retail | Prioritise daily-needs or service-anchored centres with stable tenant mix |
Macro context | Inflation easing and potential RBA rate cuts creating favourable leasing conditions | — | Economic stabilisation, limited new development pipeline | Data-driven acquisitions aligned to long-term rent resilience |
2024 to 2025 market reset: the macro context setting rental outcomes
Interest rates, inflation and overall economic momentum underpin commercial leasing cost forecasts in 2025. The Reserve Bank of Australia (RBA) signals a softening inflation trajectory and an eventual rate-cut cycle during the year. This backdrop reduces upward pressure on tenant costs via indexation and makes leasing decisions more active again. According to the National Australia Bank (NAB), confidence among property professionals hit an eight-year high this year, with expectations for rent growth across all major sectors.
Another defining element is capital availability and investment volumes. After several years of subdued activity, investment volumes are set to increase, signalling renewed interest and upward pressure on rents. This acceleration is driven by a more diverse capital base, improved pricing alignment and strong global demand.
However, supply constraints are equally relevant. High construction and replacement costs, along with zoning and land limitations in infill locations, restrict new developments. That structural tightness provides a floor under rents and allows for upward movement when occupier demand rebounds.
In sum, the stage is set for positive rent growth trajectories across commercial property. Still, the speed and magnitude will hinge on sector-specific dynamics and how well occupiers respond to returning demand.
Industrial and logistics: the engine driving commercial rent growth
The industrial sector remains the standout among commercial property sectors in terms of commercial rent growth. According to the same NAB survey, industrial vacancy is extremely low at around 3.2 % nationally, down from 3.4 %. This could reflect robust demand paired with limited immediate supply.
Moreover, the Property Council of Australia reports that while vacancy is expected to rise modestly into 2025, rental growth will persist and divergence between precincts will deepen.
For example, Prime net rental growth in some smaller markets like Adelaide (12% in the 12 months to Q3) and Perth (7%) led in 2024, according to the same report. In larger markets, the driver is location scarcity and precinct-specific supply constraints rather than broad-based growth.
These dynamics set up an optimistic commercial leasing cost forecast for industrial property:
- Prime infill logistics assets are likely to experience face rent growth, assuming occupier demand remains strong and vacancy stays low.
- Secondary stock or less well-positioned precincts may see growth, with higher incentive risk.
- Investors should inspect lease expiry profiles, building specification and location tightness to extract the rent-growth upside.
- For investors, this sector offers strong rental growth potential and limited downside, provided they target high-quality, well-located assets and understand sub-market supply cycles.
Commercial offices: recovery tempered by structural shifts
The office segment faces a complex recovery path in 2025 and beyond. According to KPMG’s Commercial Property Market Update, national office vacancy has begun to show signs of easing in core markets and there is emerging evidence of face-rent growth for high-quality assets.
KPMG notes that while returns in the office sector remain negative, there is clear evidence that the market has bottomed out and is stabilising. Vacancy rates are now trending lower in core markets, leasing enquiries and conversions are improving and barriers to new supply remain significant. These shifts are supported by expectations of rate cuts, which should lower risk premiums and catalyse further demand for high-quality office assets.
For the sector, the key thresholds to watch include quality grade (A and premium), precinct amenity and occupier willingness to commit. Corporates are consolidating into core locations and demand is gathering for modern, well-connected workplaces.
In terms of commercial leasing cost forecast for offices:
- For prime CBD office assets, rents could rise in the mid-2% to 6% range year-on-year, depending on precinct and grade.
- Secondary and fringe assets may continue to struggle, with vacancy or tenant incentives dampening net effective rent growth.
- Incentives remain elevated in weaker precincts, meaning headline rents may not fully capture the story of occupancy costs.
- Investors should therefore prioritise modern, well-leased assets in tight-supply precincts rather than broad exposure across the entire office market.
Retail sector: steady rent growth supported by resilient demand
The retail market was showing upward momentum heading into 2025. NAB forecasts that retail rents will grow by 0.8% in the short term and by 1.3% over the next two years. From our vantage point, retail is positioned to outperform other commercial property sectors in 2026, thanks to limited new supply and evolving retail formats.
High-street and neighbourhood retail zones anchored by essential services are gaining favour. We’re seeing denser suburban retail districts and live-work-play formats registering stronger rental trends than traditional urban core retail.
For a retail commercial leasing cost forecast:
- Neighbourhood and sub-regional centres with supermarkets, healthcare and services exposure may see modest rent growth in the coming years.
- Flagship urban strip retail in premium locations may achieve higher growth, though foot-traffic recovery remains uneven.
- Retail assets lacking convenience or anchored daily-needs exposure should be treated cautiously due to structural retail headwinds.
- From an investor viewpoint, targeting retail assets with strong lease roll risk management, proven tenancy covenants and limited near-term supply will support above-average rental growth.
Key drivers of 2026 rent outcomes (cross-sector)
Several underlying forces will shape how commercial rent growth plays out across sectors.
- Population and labour market trends: Australia’s net overseas migration remains elevated, and employment stays near historic lows, supporting demand for space.
- Construction and replacement cost inflation: New supply is constrained by higher input costs and planning hurdles; this supply-side constraint helps underpin rental growth.
- Cost burdens for occupiers: Energy, insurance and statutory charges are part of total occupancy cost and rental indexation formulas (CPI or fixed escalation) are critical to model accurately when forecasting leasing cost outcomes.
- Structural demand shifts: Growth in e-commerce logistics, last-mile distribution, hybrid-work mixes and experience-driven retail means that not all buildings or precincts will benefit equally. Investors must differentiate by asset quality and tenant strategy rather than assume uniform rent growth.
Turn commercial property rent trends into smarter acquisitions
With Australia’s commercial rent growth entering a new phase, experience and access to the right opportunities will define success. Costi Cohen delivers this advantage through our acquisition model, which combines deep market intelligence, disciplined negotiation, coordinated property management and unique access to off-, pre- and post-market commercial assets.
Costi Cohen’s team applies more than 60 years of combined experience in commercial real estate to analyse rent movements, assess performance potential and negotiate optimal terms. We remain focused on making the buying process refined, transparent and rewarding for every client. Reach out to us for a consultation.
Disclaimer: The information in this article is provided for general informational purposes only and does not constitute financial, investment or property advice. While every effort has been made to source data from reliable and current publications, readers should seek independent professional advice before making any investment decisions. Market conditions and forecasts are subject to change without notice.